Jefferies sees Hindustan Aeronautics to benefit from opportunities for Indian defence companies and said the current dip in the stock could be the right time for buying on the dip. The stock had hit an all-time high of ₹5,674.75 on July 9.

What The Brokerage Said: Global brokerage Jefferies is expecting a short-term bounce back after the correction in PSU stocks which includes HAL due to improvement in government spending in the second half of the year along with improved seasonality and better valuations.

Jefferies sees an opportunity for Indian defence companies to grow by 14% compound annual growth rate in FY24-30 powered by the government’s indigenisation efforts which will result in 13% annual growth in domestic defence spending, 8% growth in total defence spending and 18% growth in exports.

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HAL is the market leader with 37% of production among defence public sector firms in FY22, said the brokerage. The company’s ₹94,000 crore order book in FY24 which is 3.2 times the sales and provides healthy revenue visibility for FY24-27 estimates, the research firm noted.

The company has also an order pipeline of ₹1.6 lakh crore to ₹1.7 lakh crore in the next 12-24 months, Jefferies said. The brokerage sees a three-time rise in absolute profits over the next 6 years on a debt-free balance sheet with a 23% return on equity. The research firm set a target price of ₹5,725 which indicates a 28% upside from the previous day’s close.

Other Buy On Dips Ideas: Jefferies also saw opportunities in Coal India, Indigo, Godrej Consumer, Punjab National Bank, Macrotech, Cholamandalam Finance, Dabur India and GMR Airports. These stocks have also seen a fall from the July highs and Jefferies sees opportunities in the stocks as “buy on dips” candidates.

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